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Pirelli cuts guidance for operating margins over inventories

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Pirelli cuts guidance for operating margins over inventories
FILE PHOTO: A Pirelli tyre is seen before a ceremony at the Milan Stock Exchange, in Milan, Italy, October 4, 2017. REUTERS/Massimo Pinca   -   Copyright  MASSIMO PINCA(Reuters)
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MILAN (Reuters) – Italian tyre-maker Pirelli <PIRC.MI> on Tuesday cut its operating profit margin guidance for the second time this year, citing higher costs as it drew on inventories.

Adding to a string of auto parts suppliers hit by prolonged industry weakness, Pirelli said it forecast a full year margin on its adjusted earnings before interest and taxes (EBIT) between 17% and 17.5% versus an already lowered previous target of 18-19%.

The company, which makes tyres for Formula One racing teams and premium automakers such as BMW <BMWG.DE> and Audi, said in a statement it cut its guidance after it faced greater fixed costs as it lowered production to reduce inventories.

Last week German auto supplier Continental <CONG.DE> said that slower automobile production growth over the next five years had forced it to book a 2.5 billion euro impairment. France’s Michelin <MICP.PA>, though maintaining its full-year profit guidance, cut its forecast again for the global tyre market.

But at the same time Pirelli said its 2019 revenues would grow by 2.5% to 5.3 billion euros, higher than a previous guidance between 1.5% and 2.5% this year.

In 9-month results, Pirelli said its adjusted EBIT before start-up costs fell to 685 million euros ($761 million), in line with a market consensus provided by the company.

Pirelli said it would present its industrial plan to 2022, previously scheduled on Dec. 11, in the first quarter of next year as it needed to take further initiatives in a context which Pirelli described as “more challenging compared with the forecasts of recent months”.

(Reporting by Giulio Piovaccari; editing by Grant McCool)

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